Debt Investments - As of March 31, 2025, 87.5% ($563.3 million) of the debt investment portfolio at fair value consisted of Senior Term Loans[230] - The total debt investments at fair value as of March 31, 2025, were $643.567 million, compared to $638.779 million at the end of 2024[239] - The largest debt investments represented 23% of total debt investments outstanding as of March 31, 2025[239] - Biotechnology sector debt investments increased to $99.806 million (15.5% of total portfolio) as of March 31, 2025, from $80.988 million (12.7%) at the end of 2024[239] - As of March 31, 2025, the company's debt investments had a weighted average credit rating of 3.1, with 24.7% rated 4, 64.5% rated 3, 8.4% rated 2, and 2.4% rated 1[240] - As of March 31, 2025, 99% of the outstanding principal amount of the company's debt investments bore interest at floating rates[334] Investment Performance - The total portfolio value decreased from $697.891 million on December 31, 2024, to $689.553 million on March 31, 2025[237] - Total investment income decreased by $1.6 million, or 6.2%, to $24.5 million for the three months ended March 31, 2025, compared to $26.1 million for the same period in 2024[244] - Interest income on debt investments decreased by $2.4 million, or 9.3%, to $23.5 million for the three months ended March 31, 2025, primarily due to a decrease in the Prime Rate[245] - PIK interest income decreased by $1.1 million, or 79.4%, for the three months ended March 31, 2025, accounting for 1.2% of total investment income[246] - Net unrealized depreciation on investments totaled $32.2 million for the three months ended March 31, 2025, primarily due to the underperformance of portfolio companies[258] New Investments - New debt and equity investments for the three months ended March 31, 2025, amounted to $102.439 million, compared to $34.569 million for the same period in 2024[237] - The net new debt and equity investments for the three months ended March 31, 2025, were $73.689 million, significantly higher than $23.319 million in 2024[237] Cash and Financing Activities - As of March 31, 2025, the company had cash and investments in money market funds totaling $74.0 million, down from $97.5 million as of December 31, 2024[259] - The company reported cash used in operating activities of $13.2 million and cash used in financing activities of $10.2 million for the three months ended March 31, 2025[270] - The company expects to raise additional equity and debt capital opportunistically to support future growth, subject to market conditions[272] - The company believes its current cash, cash generated from operations, and funds available from Credit Facilities will be sufficient to meet working capital and capital expenditure commitments for at least the next 12 months[274] Expenses and Fees - Total expenses increased by $0.3 million, or 2.1%, to $13.4 million for the three months ended March 31, 2025, compared to $13.1 million for the same period in 2024[251] - Interest expense increased by $0.5 million, or 6.4%, to $8.7 million for the three months ended March 31, 2025, due to an increase in average borrowings[252] - The Advisor earned $3.2 million and $3.5 million in base management fees for the three months ended March 31, 2025 and 2024, respectively[308] - The Advisor earned $0.4 million under the Administration Agreement for the three months ended March 31, 2025 and 2024[311] Capital Structure - The company has a stock repurchase program authorized for up to $5.0 million, which allows repurchases at prices below the net asset value per share[265] - The company issued $57.5 million of 4.875% unsecured notes due in 2026, with a maturity date of March 30, 2026[289] - The company issued $50.0 million of 6.25% unsecured notes due in 2027, with a maturity date of June 15, 2027[290] - The company raised $20.0 million from the issuance of 7.125% convertible notes due in 2031, with net proceeds of approximately $18.6 million[291] - As of March 31, 2025, the total outstanding principal balance of the 2031 Convertible Notes was $20.0 million[296] - The company had total contractual obligations of $693.3 million as of March 31, 2025, with $126.5 million due within one year[298] - The company had unfunded commitments of $200.0 million as of March 31, 2025, including $20.0 million of undrawn revolver commitments[299] Regulatory and Taxation - The company has elected to be treated as a RIC under Subchapter M of the Code, which generally exempts it from corporate-level income taxes[231] - The company must distribute at least 90% of its net ordinary income and net short-term capital gains to qualify as a RIC[305] - A portion of distributions may be deemed a return of capital if taxable earnings fall below total distributions made[306] - The company has adopted an "opt out" dividend reinvestment plan (DRIP) for common stockholders, allowing cash distributions to be automatically reinvested unless stockholders opt out[307] Market Conditions and Economic Factors - Inflation is accelerating in the U.S. and globally, driven by supply chain issues, geopolitical events, and rising energy prices, which may impact profit margins of portfolio companies[340] - Economic activity is accelerating, but market volatility is exacerbated by geopolitical tensions and uncertainties surrounding the 2024 U.S. elections[340] - Persistent inflationary pressures and foreign currency exchange volatility could affect profit margins of portfolio companies[340] - The company expects to continue funding investments through borrowings, which may increase costs in periods of elevated interest rates[339] - The interest payable on various facilities is based on different rates plus margins, indicating a complex interest rate environment[336] Interest Rate Sensitivity - The company’s net income is highly dependent on the difference between borrowing rates and investment rates, with potential adverse effects from significant market interest rate changes[339] - A 300 basis point increase in interest rates would result in a net asset change of $17,707,000, while a decrease of 300 basis points would lead to a change of $(6,633,000)[335] - The company has floating interest rate provisions in its credit facilities, with a floor of 0.10% per annum based on a prime rate index[336] - Hedging instruments have been used to protect against interest rate fluctuations, but may limit benefits from lower interest rates on fixed-rate investments[336] Advisor and Management Changes - On March 31, 2025, Momentum US Bidco LLC acquired 75% of the outstanding equity interests of Monroe Capital Intermediate Holdings, LLC, resulting in a change in control of the Advisor[310] - The company has relied on exemptive relief from the SEC since June 30, 2023, allowing greater flexibility for co-investments with other accounts managed by the Advisor[312]
Horizon Technology Finance(HRZN) - 2025 Q1 - Quarterly Report